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Before you sign a termsheet, take your VC to the Chiropractor
[caption id=”attachment_409" align=”alignright” width=”300" caption=”Alignment with your investors is crucial. Adjustments are available if you ask questions before you sign the term sheet”]
When you are fund-raising, your job becomes getting cash into your company. However, the best entrepreneurs don’t just get funded, but find funding alignment with their investors in terms of values, vision and approach. Since joining First Round Capital I have met with hundreds of entrepreneurs and many of them never ask me any questions about our process or our approach to working with our portfolio.
I know the fund-raising process is really, really hard. It is an emotional roller-coaster. It demands 100% of your energy, your time and your heart but you should be asking questions, interviewing your potential investors, and choosing your investors.
It is important to know you have alignment in terms of financial interests and that you are not only working toward the same outcome but also have agreement on how to get there. If you do this, you will experience many of the commonly listed benefits of chiropractic treatment:
1. It is completely safe
There should be no penalty for asking questions and if there is, you probably don’t want to work with those guys anyway.
2. Allows better sleep
The fundraising process is hard for many reasons, but the thing I hated most was being evaluated over and over in a process where I felt I had little to no control. Asking questions about your investor’s expectations and approach put you in the driver’s seat and will help you feel comfortable when you accept the term sheet.
3. Corrects the cause of pain rather than treating the symptoms
Treating the symptoms of misaligned exit expectations or disagreements around strategic vision is always painful to you and to the company. Don’t set yourself up to suffer through the distraction and pain of on-going treatment of symptoms. Correct the cause of the problem by asking questions prior to accepting the investment.
4. Relieves stress and tension
Alignment with your investors on values, vision and approach allows you to build trust and treat your investors as partners with no hidden agenda. You will get much more strategic value as you work to build your business and steer your company to success if you are not fighting the people who backed you along the way. It will also be much more fun and probably more successful.
5. Improves posture
Your investors will become one of the most powerful signals about your position in a market, your prospects for the future and the overall quality of the operations of your business. Alignment of interests will create a powerful posture for your business and insure you are all pulling in the same direction when it becomes time to get back on the roller-coaster and raise your next round.
The benefits of Chiropractic treatment are touted by some and dismissed by others, but when it comes to raising money, I am a believer. Take your VC to the chiropractor and find alignment or keep looking for other sources of capital.
If you have benefited from alignment with your investors or have suffered through the opposite, I would love to discuss it in the comments.